ELECTRONIC MAIL OPTIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R001700060017-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 20, 2016
• Document Release Date: April 3, 2007
• Sequence Number: 17
• Content Type: MEMO

Approved For Release 2007/04/03: CIA R?4, 00
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Memorandum for:
From:
Subject:
49R001700060017-5
THE SECRETARY OF COMMERCE
Washington, D.C. 20230
Members, Cabinet Council on
Malcolm Baldrige p 6
Chairman Pro Tempor
Commerce and Trade
Electronic Mail Options.
Decision Memorandum
Introduction
The U.S. Postal Service (USPS) announced in 1978 that it would
inaugurate a new Electronic Computer-Originated Mail ("ECOM")
service. The USPS plans to begin offering this service on
January 4, 1982; this could lead to other USPS "electronic mail"
services. The Cabinet Council considered this matter on November
13, but reached no final decisions.
ECOM is computer-generated first-class mail entered into the
mails via a telecommunications carrier in minimum quantities of
200 messages, at any of 25 "serving post offices" (SPOs), and
there processed, printed in hard copy, and delivered within two
business days, at a price for postage of 26 cents for the first
page and 5 cents for the second page. The customer would pay the
telecommunications carrier separately.
Positions on the Issues
The Departments of Commerce and Justice, and the Council of
Economic Advisers, have taken positions on the USPS' possible
involvement in the electronic mail business. CEA has stated that
electronic mail has none of the "natural monopoly" or similar
economic characteristics that have justified government
enterprises in the past, and that USPS participation in this line
of commerce implicates significant competitive risks as the USPS
is not likely to allocate relevant costs properly. CEA agrees
with the Justice and Commerce positions that are discussed below.
The Commerce Department has stated that allowing the USPS to
diversify into the electronic mail field would conflict with
traditional U.S. policy of relying upon the private sector to
satisfy the public's telecommunications needs. Commerce contends
that existing and future demand for electronic mail services can
and is being met by many private sector communications and
computer-data processing companies. Commerce also maintains that
restrictions on USPS offerings along the lines of those indicated
Not referred to OOC.'A iV r
applies.
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in the July, 1979 Carter Administration "policy statement" are
not sustainable, given the commercial and technological dynamics
of the telecommunications industry. The Commerce Department also
agrees with the views of CEA and Justice.
The Justice Department has stated that the Postal Service should
not enter the electronic mail field both because of the potential
for anticompetitive practices, such as below-cost pricing, and
because of its statutory monopoly over the delivery of letter
mail under the "private express" laws. The Justice Department
maintains that the "separated entity" condition on USPS entry
specified in the Carter policy statement is an inadequate
safeguard against the USPS gaining unfair competitive advantages
due to its special status as a governmental establishment with a.
substantial monopoly base. Justice agrees with and supports the
CEA and Commerce positions.
The Postal Service maintains that there is a demonstrated demand
for ECOM service; that ECOM interconnections into the postal
system will be available to all telecommunications carriers and
that -- far from being anticompetitive -- this availability will
stimulate competition; that "improper" cost allocations are
virtually impossible given the uniquely close scrutiny of postal
costing by all interested parties in proceedings before the
independent Postal Rate Commission; that cross-subsidies of ECOM
costs by other postal services are unlawful and contrary to the
Postal Service's interests, as well as those of the public; that
it is generally required by law to make use of "new equipment or
devices which may reduce the cost or improve the quality of
postal services," and that ECOM service would do just that and be
in line with traditional USPS practice of using emerging
technology to move the mail more efficiently (e.g., stagecoach,
rail, motor. carriers, air); and that virtually all foreseeable
ECOM volume will consist of message traffic now using the mails.
Decisions Required
The Postal Service's ECOM proposal would be a relatively small
undertaking; at least $38 million has been spent to develop this
prototype service, and a number of customers and carriers have
made plans to participate. ECOM is under review by the
independent Postal Rate Commission to some extent. The USPS
currently contests the Rate Commission's authority over this
service. Six companies have requested interconnection rights of
the Postal Service: Graphnet, ITT World Communications, Western
Union International (Xerox subsidiary), TRT Telecommunications
(United Brands), Dialcom, and Netword. Some of these firms may
initiate court challenges to ECOM; Congress may also intervene.
The USPS has already made most of the capital commitment needed
to offer ECOM service beginning on January 4, 1982. The Rate
Commission is not likely to resolve its proceeding before the
date the USPS plans to begin service.
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The Cabinet Council should consider the following options:
First Option: Decide that the USPS should stay out of all
but the physical delivery of hard copy
messages (whether or not electronically
originated); that is, the USPS should not
undertake to market services, engage in
message processing, etc.
Possibly resolves a long-standing
controversy concerning Postal Service
entry into electronic mail.
Consistent with other Administration
"re-privatization" initiatives.
Will encourage private sector
initiatives, innovation, and
efficiency.
Economically justified decision as the
USPS has yet to make a sound case for a
permanent ECOM offering, in the
judgment of Commerce, Justice and CEA.
USPS and unions will argue that denial
of electronic alternatives will mean
the beginning of the end for a major
institution.
.Policy of exclusion will result in some
Congressional opposition.
Inconsistent with the 1970 Postal
Reorganization Act mandate that the
Postal Service be managed independently
of the Administration (comparable
to TVA).
While Justice believes it has a strong
case, it cannot guarantee efforts to
block USPS in court will succeed.
 .Approved For Release 2007/04/03: CIA-RDP84B00049R001700060017-5
Second Option: Permit current USPS course (subject
to administrative suspension of the
private express laws in the delivery
areas where electronic mail service
is being offered) while seeking
legislation explicitly to bar USPS
from offering terminal-to-terminal
electronic mail communications
services, and to end statutorily
the operation of the express laws
in any delivery area where the electronic
mail service is being offered.
Allays fears of telecommunications
industry that Postal Service might
attempt to diversify into "non-mail"
electronic communications.
Might resolve a long-standing
controversy.
Consistent with independent role
of USPS while preventing USPS incursion
into non-postal arena, according
to USPS.
Prevents Post Office expansion into
competitive areas where the Post Office
has a monopoly.
No guarantee any such legislation
would pass.
Continued investment in "generation
II" services may result in pressures
for USPS expansion into offering
of "generation III" services (i.e.,
terminal-to-terminal) as natural
business evolution to safeguard sunk
costs, thus any statutory bar, if
enacted, may only postpone that
development.
Any tampering with private express
statutes will draw strong political
opposition.
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Third Option: Permit current USPS course, but support
legislation that would explicitly bar
USPS from offering terminal-to-terminal
electronic mail communications services..
Allays fears of telecommunications
industry that Postal Service might
attempt to diversify into "non-mail"
electronic communications.
Might resolve a long-standing
controversy.
Consistent with independent role
of USPS while preventing USPS
incursion into non-postal arena,
according to USPS.
No guarantee any such legislation
would pass.
Continued investment in "generation II"
services may result in pressures
for USPS expansion into offering
of "generation III" services (i.e.,
terminal-to-terminal) as natural
business evolution to safeguard sunk
costs, thus any statutory bar, if
enacted, may only postpone that development.